The Ontario Superior Court of Justice has approved protection for $32 billion in notes as a restructuring effort continues for the troubled asset-backed commercial paper market. The committee charged with restructuring the ABCP market asked the court for protection while it waits for approval for its rescue plan.

The Pan-Canadian Investors Committee for Third-Party Structured ABCP announced late Monday afternoon that Justice Colin Campbell approved the application under the provisions of the Companies’ Creditors Arrangement Act (CCAA). The plan must now be approved by a 66 2/3% majority of all noteholders and a meeting is expected in the third week of April.

The possibility of filing under CCAA should not be considered a “last minute hail Mary pass,” said Purdy Crawford, chair of the committee, in a conference call Monday evening. The option has always been on the table, he added.

If noteholders vote in favour of the plan, a further hearing will be held before the court approximately ten days later to secure its final sanction of the plan. This pushes the closing date of the restructuring process to sometime in May.

“I understand that most investors have suffered hardship and anxiety as a result of the freezing of their investments,” said Crawford. “We are very sensitive to the plight of these investors.”

“The investors committee believes that the CCAA process going forward will provide a forum that ensures fairness and provides the greatest certainty that the plan will be implemented in a timely manner,” he added.

According to the committee, a copy of the plan and the information statement containing details on the meeting and voting process will be mailed out later this week. A copy of the plan and other documents will also be made available on the Ernst & Young Inc. public website. As well, the committee says it will soon announce dates for informational sessions for noteholders in major cities across Canada.

“Holders of the restructured notes will know what assets backed their investments,” said Crawford, of the plan. “There will be full transparency that was previously lacking, which together with enhance ratings on the new paper will contribute to their marketability.”

The restructuring includes a credit facility that Canada’s six major lenders and other institutional investors have all agreed to contribute to.

“The implementation of the restructuring plan will provide the best opportunity for the majority of the assets to mature at par by avoiding the threat of an early, disorderly liquidation,” said Ricardo Pascoe, co-president and co-CEO of National Bank Financial, in a release.

National Bank said it has committed about $815 million to the margin funding facility and that it has made credit lines available to its corporate clients that hold this financial instrument in anticipation of the plan’s outcome.

While Crawford is optimistic, he said he can’t guarantee any outcome. “If things stabilize in the next few months, the chance of recovery will be much greater,” he told reporters. “But I wouldn’t want to say that everyone is going to get all their money back at maturity.”

Finance Minister Jim Flaherty is supportive of the protection granted by the court. “I am pleased the Pan-Canadian Investors Committee and other interested parties have finalized a proposal to restructure third-party asset-backed commercial paper,” he said, in a release.

Flaherty said the federal government continues to monitor the situation for further changes.